City Council Meeting: January 8, 2008

Agenda Item:1-B  

To: Mayor and City Council 

From: Carol Swindell, Director of Finance

Subject: Modification to Existing Contract with RNC Capital Management LLC Related to Investment Management Services for the Cemetery and Mausoleum Perpetual Care Funds

Recommended Action

Staff recommends that the City Council authorize the City Manager to negotiate and execute a modification to the existing agreement with RNC Capital Management LLC (RNC) for investment management of the Cemetery and Mausoleum Perpetual Care Funds increasing the maximum contract amount by $60,000 to a not-to-exceed amount of $130,000.

Executive Summary

RNC Capital Management provides investment management services for the Cemetery and Mausoleum Perpetual Care Fund. Under the administrative authority of the City Manager to negotiate and execute Professional Services Agreements up to an amount of $70,000, the current professional services agreement with RNC (Contract #1380) was modified in July 2007 to include a not-to-exceed contract amount of $70,000. The amount was based on the anticipated completion date of the study currently underway to develop a business plan for the Woodlawn Cemetery and Mausoleum. Since the Cemetery study is not yet complete and services rendered during the first quarter of fiscal year 2007/08 resulted in contract costs exceeding the $70,000 threshold, an increase to the contract is needed which requires Council approval. Staff recommends that the maximum amount of the agreement be increased by $60,000 to a maximum of $130,000 from the current authorized amount of $70,000. Subsequent to the completion of the Cemetery and Mausoleum business plan, an RFP will be issued for investment management services.

Discussion

The City owns and operates Woodlawn Cemetery and Mausoleum. A portion of the sale of each burial plot, crypt, or niche is set aside for perpetual care services and is deposited into the Cemetery or Mausoleum Perpetual care fund, as appropriate. The income from these funds is used to pay for perpetual care costs. The principal can only be used for investment purposes. Investment guidelines are set by the City Council separately from the City’s Investment Policy for pooled funds.

In 1971, the City Council approved the retention of an investment manager for these funds. This was necessary because unlike the City’s investment portfolio, a portion of the perpetual care funds are invested in equities, which require a degree of investment expertise and continuous monitoring not otherwise available to City staff.

RNC has provided these services since 1992. The current contract with RNC was executed in October 2006 and modified in July 2007. Prior to the July 2007 modification, City staff informally contacted several investment managers regarding investment management services for these funds. Based on these discussions, it was determined that any formal Request for Proposals for these services would be delayed until a comprehensive business plan for the Cemetery and Mausoleum is completed since any investment plan would be dependent on the goals of the business plan. As noted above, a study is currently underway, but not yet completed. The July 2007 modification, executed under the administrative authority of the City Manager, increased the maximum contract amount to $70,000, but since this amount has now been exceeded, an increase is necessary at this time. This modification requires Council authorization as the total contract amount will now exceed City Manager authority of $70,000 limit. This modification will allow the City to continue to use RNC Capital for these services until the Cemetery and Mausoleum business plan has been finalized and an RFP process for investment management services can be conducted. The current contract provides the City with sufficient flexibility to change investment managers, if necessary, once the Cemetery and Mausoleum business plan is completed.

Previous Council Actions

As noted above, Council authorized an investment manager for the perpetual care funds in 1971. Council approved the retention of RNC Capital for these services in February 1992.

Financial Impacts & Budget Actions

RNC’s annual fee for the investment management services is 0.60% of the total value of the account, which is currently $8.53 million. Projected annual payments for the next twelve months will be approximately $60,000. This assumes that the portfolio will grow at an annualized rate of approximately 8% and also includes the payment of $3,301 currently due. The $60,000 increase added to the current authorized amount of $70,000 will bring the total not-to-exceed contract amount to $130,000, covering a period of thirty months. When the Cemetery business plan is completed, an RFP for investment management services will be conducted. The existing contract can be terminated at any time.

These funds are budgeted in the Cemetery Fund in account 37641.555060, so no budget action is required as a result of this action.

Prepared by:

David R. Carr, Principal Budget Analyst-Investments

Approved:	Forwarded to Council:
Carol Swindell Director, Finance	P. Lamont Ewell City Manager